The Telkwa Metallurgical Coal Project, into which Allegiance is earning 90%, has the potential to produce PCI or SSCC metallurgical products at FOB costs of ~US$55/tonne, within the lowest 5% of the global seaborne trade, and thus providing a buffer against adverse price movements. The potential for a low-cost operation is by virtue of three key factors; a low LoM strip ratio, good washing yields and ready access to infrastructure, a key consideration with bulk commodities. The Project is located within 24km of the Canadian National Rail, which links directly to the underutilised Ridley Island Coal Terminal, just 375km down the track (which itself is closer to key Asian markets than Australia's east coast). The Project is also served by grid power and has ready access to water, all saving both capital and operating expenditure.

The Company is also looking at a quick development strategy, with the potential to start operations with a “regional” scale mine, of under 250,000tpa clean coal production. Under the applicable laws such operations can be permitted under a less onerous and significantly shorter time frame regime than that for larger operations, which can take up to four years to permit. There is the possibility to commence operations in 2019, with the plans then to undertake the permitting for an expanded operation whilst operating the “regional” scale mine. With clean coal reserves of 42.5Mt, Telkwa has the potential to support a long-term operation.

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